The world’s wealthiest individuals suffered their biggest decline in size and wealth in 10 years as a result of geopolitical and macroeconomic uncertainty, according to Capgemini SE’s World Wealth Report.
The number of high-net-worth (HNW) individuals, or those with investable assets of more than US$1 million, dropped by 3.3 per cent to 21.7 million in 2022, and the value of their combined wealth decreased by 3.6 per cent to US$83 trillion.
The steepest wealth declines were recorded in North America (7.4 per cent), Europe (3.2 per cent) and Asia-Pacific (2.7 per cent). But North America is still the leader compared to other regions.
“Wealth-management firms are at a critical inflection point as the macroenvironment is forcing a shift in mindset and business models to drive sustainable revenue growth,” Nilesh Vaidya, global head of banking and capital markets at Capgemini, said in a press release. “The industry will need to fortify value, empower relationship managers and unlock new growth opportunities to remain relevant.”
In Canada, the number of HNW individuals decreased by 2.4 per cent to 428,400, and their combined wealth dropped by 3.3 per cent, or US$45.7 billion.
A number of macroeconomic factors contributed to the wealth decrease in Canada: real estate prices only grew by 1.6 per cent in 2022, compared with 10.6 per cent in 2021; market capitalization fell by 10 per cent last year; and the high rate of inflation, peaking at 8.1 per cent in June, reduced their purchasing power.
Some global markets, however, showed resilience. Africa (1.6 per cent), Latin America (2.1 per cent) and the Middle East (1.5 per cent) registered financial growth in 2022 because of strong performance in the oil and gas sectors.
“Agility and adaptability are going to be key for high-net-worth individuals as their attention gears towards wealth preservation,” Vaidya said. “Their success will be tied towards solving issues relating to digital immaturity in the wealth value chain.”
Globally, HNW individuals are holding more of their wealth in cash today (34 per cent) than at any point since Capgemini began doing the report 27 years ago. The rest is in equities (23 per cent), real estate (15 per cent), fixed income (15 per cent) and alternative investments (13 per cent).
A key driver of Canadians’ wealth was the rising ratio of national savings as a percentage of gross domestic product (GDP), which reached 24.2 per cent in 2022, up from 23.8 per cent in 2021.
Though Canada’s growth in real GDP was lower last year (3.4 per cent) than in 2021 (4.6 per cent), it was still the fastest-growing country in the G7. The report said this is due to the country’s strong energy independence and very few direct linkages to Russia or Ukraine.
Overall, global economic growth slowed to 3.2 per cent from six per cent in 2021, and the future doesn’t seem to be looking brighter. The report predicts that growth will remain “skittish” in 2023 as macroeconomic uncertainties persist.
“Many HNWIs and international banking clients are concerned about economic, social and political volatility in their countries and want to access global markets in order to achieve jurisdictional diversification,” Melanie Aimer, head of international banking and global head of client experience, Barclays Private Bank, said in the report. “One of their main objectives is to preserve their wealth for future generations.”